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Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: What a FED meeting? Yeah, what a market reaction?
Speaker 4: Well, listen, I think it's so interesting to hear the
Speaker 4: conversation that the gang, the surveillance Gang, really just having
Speaker 4: on television and radio about you know, was it hawkish,
Speaker 4: a little bit hawkish? Was it dubvish? We certainly saw
Speaker 4: equity Riley, we're coming off our best levels of the session.
Speaker 4: But nonetheless, Tim, we did see that immediate market reaction.
Speaker 4: Stocks moved up, we saw it, yields back off. I
Speaker 4: feel like I can't wait for the main meeting already.
Speaker 1: Yeah, I'm already looking forward to that, and we're gonna
Speaker 1: get a lot of data between now and then, too, Carol.
Speaker 1: As we heard from Charlie, the FED, as expect it
Speaker 1: held their benchmark rate study for a second straight meeting,
Speaker 1: though they telegraphed expectations for slower Carol economic growth and
Speaker 1: higher inflation.
Speaker 4: Did indeed, Ja Powell saying the ust economy, folks, it
Speaker 4: is strong overall, and yet there are some signs of moderation.
Speaker 5: Recent indications, however, point to a moderation in consumer spending
Speaker 5: following the rapid growth seen over the second half of
Speaker 5: twenty twenty four. Surveys of households and businesses point to
Speaker 5: heightened uncertainty about the economic outlook. It remains to be
Speaker 5: seen how these developments might affect future spending and investment.
Speaker 4: That, of course, with Jay Powell at the press conference
Speaker 4: today a little bit earlier. As for market reaction, as
Speaker 4: we mentioned, we did see stocks rally and use treasure
Speaker 4: yields back off right after the decision. Let's get more
Speaker 4: though on what we heard from the Fed today and
Speaker 4: what we saw in terms of market reaction. Keep in
Speaker 4: mind that we're going to be covering all of this
Speaker 4: over the next hour and a half with us as
Speaker 4: Bloomberg Intelligence Chief US Interest Rates Strategist IRA Jersey and
Speaker 4: Veronica Willis, global investment strategist at Wells Fargo Investment Institute.
Speaker 4: Ira is at BI headquarters in Prince of New Jersey.
Speaker 4: Veronica is in Saint Louis hey Ara, I want to
Speaker 4: start with you, how did the FED do you think
Speaker 4: on messaging and in assessing today's current US economic backdrop
Speaker 4: and what it needs in terms of monetary policy? And
Speaker 4: I am curious did it filmore hawkish? Did it feel
Speaker 4: more duvish? What was your read?
Speaker 6: So?
Speaker 7: Well, we have a natural language processing model that parses
Speaker 7: all the words and language from all of the opening statements,
Speaker 7: and this one was incredibly neutral, and it had been
Speaker 7: somewhat dubvish last month, and you know, being as neutral
Speaker 7: as neutral can be, it was a little bit surprising
Speaker 7: maybe to see the treasury market rally a little bit
Speaker 7: and also bowl steepened. So before the Jay Powell started
Speaker 7: to speak, treasury yields were higher by a little bit
Speaker 7: on the day, and then we rallied about ten basis
Speaker 7: points in two year yields, you know, soon after he
Speaker 7: started to speak, So the market certainly took him as dubvish.
Speaker 8: He wasn't hawkish by any stretch of the imagination.
Speaker 7: The one thing that I think is interesting is the
Speaker 7: dop plot. And you know, we thought that maybe the
Speaker 7: median dot would move down a little bit.
Speaker 8: It didn't. It stayed the same, So this is pretty
Speaker 8: unusual for.
Speaker 7: The market actually to rally like it did, or the
Speaker 7: rate market to rally like it did when the Fed
Speaker 7: didn't move the.
Speaker 1: Dots well, Ira, I wanted to talk a little bit
Speaker 1: about that, because it didn't seem like there was any
Speaker 1: certainty with regard to the Federal reserves economic outlook. We
Speaker 1: heard as much from Mike McKee on Bloomberg TV and
Speaker 1: Bloomberg Radio a little earlier. The Fed doesn't really know
Speaker 1: where we are. Why does the market think it knows
Speaker 1: where we are?
Speaker 7: Well, the market has to price something, right, So I
Speaker 7: think that the market probably took what the FED said,
Speaker 7: Not so much that they're necessarily the Fed's going to
Speaker 7: be hawkish or duvish, but I think one of the
Speaker 7: things is that the market might be thinking, hey, the
Speaker 7: Fed might make a policy mistake here because we are
Speaker 7: seeing a slowdown. But the FED and the FED dots
Speaker 7: are suggesting they're not going to cut rates very quickly
Speaker 7: and certainly not in the near term. And you really
Speaker 7: saw that rally pick up after j. Powell mentioned once
Speaker 7: again that he thought that they could that they could
Speaker 7: be patient and they didn't have to be in a hurry.
Speaker 7: I mean the exact words were, we're not in a
Speaker 7: hurry to make a rate adjustment, So that means we're
Speaker 7: here probably for another three to six months at least
Speaker 7: on the FED fundt rate.
Speaker 4: Bronick, I want to bring you into this conversation in
Speaker 4: terms of markets. We've just been talking about this with IRA.
Speaker 4: I mean, we certainly did see equity markets Riley were
Speaker 4: off our highs of the session. What's the investor read
Speaker 4: on this decision Fed commentary? Do you feel like investors
Speaker 4: have it right and it has anything that we got
Speaker 4: from the FED share and from the FOMC today in
Speaker 4: its decision and commentary and revised outlook, has it changed
Speaker 4: your investment outlook?
Speaker 9: I think that investors are really looking at the kind
Speaker 9: of best case scenario growth is going to slow enough
Speaker 9: to afford the FED to do you know, two or
Speaker 9: more cuts this year? And I think that's a little
Speaker 9: bit too optimistic. So the market may have been a
Speaker 9: little bit too optimistic today in response to this data
Speaker 9: or in response to what the FED has said, and
Speaker 9: I think that it's you know, more realistic to expect
Speaker 9: maybe one cut this year. And I think that the
Speaker 9: risk is a little bit more on the side that
Speaker 9: there might not be a cut this year versus two
Speaker 9: or more cuts. So I think it's just another example
Speaker 9: of the market kind of taking what it wants from
Speaker 9: what Pal says, taking what it wants from what the
Speaker 9: FED has shown us, and hoping for that best case scenario.
Speaker 4: I mean, what was the most important part of what
Speaker 4: we got from the FED Chair of Veronica in your
Speaker 4: view today?
Speaker 9: Yeah, I think what was really interesting were his thoughts
Speaker 9: around the consumer and how that might impact future economic data.
Speaker 9: I think that's something that's becoming more and more important,
Speaker 9: just considering how important that consumer spending is to driving
Speaker 9: our economy, and so the FED is watching really closely
Speaker 9: all of these sentiment surveys that have come out with
Speaker 9: consumers feeling uncertain about their ability to continue to spend.
Speaker 9: We haven't necessarily seen that flowing through very strongly in
Speaker 9: any of the heart data, but it's something we're watching
Speaker 9: very closely, and I think it's something that the FED
Speaker 9: is watching very closely as well.
Speaker 1: Ye, Eric, come on back in here. Given what we
Speaker 1: heard from Fetcho J. Powell today, and we think about
Speaker 1: sort of the upcoming economic data that we get, what
Speaker 1: is the next catalyst that you have your eye on.
Speaker 8: So you know, we're like in this weird place.
Speaker 7: So we do get the PC deflator next week, and
Speaker 7: you know, I'm not sure that that's really going to
Speaker 7: matter that a whole lot because we kind of know
Speaker 7: what it is, given we've gotten the inputs to that.
Speaker 7: So it's going to wind up being things like some
Speaker 7: of the survey data, the ISM data that we get
Speaker 7: in two weeks, plus the payroll report obviously is the
Speaker 7: big one. I think something else that's going to be
Speaker 7: interesting is the implementation of the slowing of runoffs. So
Speaker 7: you know, it hasn't gotten a lot of attention, only
Speaker 7: had one question at the very end of the press conference,
Speaker 7: but the Federal Reserve is again having the amount of
Speaker 7: quantitative tightening it's doing and it's only going to have
Speaker 7: about twenty billion dollars a run off come April first,
Speaker 7: And I think that that's something that is kind of
Speaker 7: flying under the radar. And how will that affect liquidity
Speaker 7: and markets once that's implemented, I think will be an
Speaker 7: interesting thing to look out for.
Speaker 4: Are you already looking forward to the main meeting? Ira?
Speaker 7: I'm looking for I look forward to every meeting, but
Speaker 7: we know we get the minutes between, then you know
Speaker 7: the minutes will be really interesting because there was a
Speaker 7: lot to unpack in this meeting, in this meeting, so
Speaker 7: the minutes could be really an interesting read when we
Speaker 7: get them in three weeks.
Speaker 1: I was gonna say, Caroly, he's not as boring as
Speaker 1: you and me where we're you know, we're just like
Speaker 1: already looking forward to the May meeting. Hey, Ira, before
Speaker 1: we let you go, what was one question that you
Speaker 1: didn't get answered from j Powell today?
Speaker 8: Yeah? I think it was a little bit about their.
Speaker 7: About the balance sheet and how they see the balance
Speaker 7: sheet reacting with the economy.
Speaker 8: He has been asked that before, but it's been a
Speaker 8: little while.
Speaker 7: And given that they that they did take action today
Speaker 7: by slowing the pace of asset runoff, that I think
Speaker 7: that can be pretty important. And he wasn't asked about
Speaker 7: the other side of the balance sheet, right, So the
Speaker 7: asset runoff occurs and then eventually we're going to have
Speaker 7: a time when there's not enough liquidity, and we know
Speaker 7: that there's been issues with the standing repo facility and
Speaker 7: some of the ways that they conduct liquidity activities and actions,
Speaker 7: and he wasn't asked at all about that either, So
Speaker 7: I would be really interested to, you know, kind of
Speaker 7: dig into those weeds because this is the plumbing of
Speaker 7: the entire financial economy that we have. So if the
Speaker 7: financial economy, the repo market, and the funding markets break,
Speaker 7: everything else comes crashing down, as we saw in two
Speaker 7: thousand and eight, right, So we have to make sure
Speaker 7: that the FED has the tools in order to handle
Speaker 7: that once we get to the lowest comfortable level of reserves.
Speaker 4: It there so much appreciate both of you and your
Speaker 4: views on all of this. Bloomberg Intelligence Chief US Interest
Speaker 4: rates Strategist Ira Jersey and Veronica Willis, Global investment strategist
Speaker 4: at Wells Fargo Investments Institute.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: on Applecarplay and the Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube Timmy.
Speaker 4: Now, we think about Ryan Deetrick a lot, and we've
Speaker 4: been hoping to catch up with him. So we're so
Speaker 4: grateful that we're going to get to him in just
Speaker 4: a moment because we just want to remind everybody. He
Speaker 4: has been a US stock optimist and write in his
Speaker 4: market recession calls for the last couple of years. He
Speaker 4: nailed it back in twenty twenty three, also twenty twenty four,
Speaker 4: and when we talked to him with him in December
Speaker 4: he said the bull run had more room to run.
Speaker 1: He did, however, early last month note that history shows
Speaker 1: us that as an Eagles Super Bowl victory could tank
Speaker 1: the stock market, something that was making the rounds on
Speaker 1: social media did note Karl that success for Philadelphia sports
Speaker 1: teams has previously been followed by trouble times in the
Speaker 1: US economy and markets. I mean, how do you even
Speaker 1: make sense of this stuff? It's like talk about somebody who, like,
Speaker 1: you know, reads astrological charts.
Speaker 4: I don't know. I think you know, you never know
Speaker 4: where the market can take its cues from. So all right,
Speaker 4: let's see what Ryan has to say. He is back
Speaker 4: with us and he is chief market strategist at the
Speaker 4: RIA and also platform for advisors the Carson Group. He
Speaker 4: is with us. Where are you Ryan today?
Speaker 3: Cincinnati?
Speaker 4: Cincinnati? So tell us that the Eagles one are we doomed?
Speaker 10: Well, that's a playful one. We don't blindly invest in that.
Speaker 10: But historically when a team from Philadelphia has won the
Speaker 10: World Series or Super Bowl, trouble has come for the
Speaker 10: stock market. Talk of two thousand and eight, you're talking
Speaker 10: the early eighties double recession. You've got the crash at
Speaker 10: twenty nine in there. Now, that's playful. You know, we're
Speaker 10: not getting two worked up on that. But the big
Speaker 10: question is is this surprising, right that we had some volatility?
Speaker 10: Second on, you got come on for a while, say
Speaker 10: we're pretty optimistic. But we've been also pointing out the
Speaker 10: first quarter of a post election years usually not that great.
Speaker 10: The first quarter after twenty percent gain usually not that great.
Speaker 10: The first quarter the last twenty years, stocks are actually
Speaker 10: negative for the year on average until like March sixteenth.
Speaker 10: March teenth set in March seventeenth, right where we bottomed,
Speaker 10: you know, potentially now and I guess welcome to March
Speaker 10: Madness said, oh, this is the radio, but I think
Speaker 10: I think I'm on YouTube. I've got my Xavier shirt
Speaker 10: on the Xavier Boy. I'm in Cincinnati. They played tonight
Speaker 10: in the first four up in dayton I'm going We're
Speaker 10: gonna take out Texas. Just wanted to say that, sorry
Speaker 10: to my friends at time.
Speaker 3: Okay, that's okay.
Speaker 1: You can make market predictions and you can also make
Speaker 1: your bracket predictions.
Speaker 3: As we're going.
Speaker 1: Ryan, So you did say, and I want to make
Speaker 1: sure you said this, you said that we did bottom
Speaker 1: for this cycle?
Speaker 3: Is that right?
Speaker 10: Well? I mean, boy, what put some pressure on me?
Speaker 10: But yeah, we think we did. I mean, listen, there's
Speaker 10: a couple of ways to look at this. We had
Speaker 10: a regular ten percent correction, didn't have one last year, right,
Speaker 10: All the fear came up when I took a look
Speaker 10: at previous twelve times the market went into a correction
Speaker 10: but did not go into a bear market. That's our
Speaker 10: base case. We do not see a bear market. Tim
Speaker 10: five of those times you bottomed the day you went
Speaker 10: into a correction, so that'd be last Thursday. And everybody
Speaker 10: was very bared up last Thursday, rightfully, so a lot
Speaker 10: of scary headlines. And then we had that back to
Speaker 10: back ninety percent up days on the S and P
Speaker 10: five hundreds and ninety percent of the stocks in the
Speaker 10: S and P five hundred of two days in a row.
Speaker 10: That historically is quite bolish. Right, six months later, you're
Speaker 10: up like fifteen percent on average, higher ten out of
Speaker 10: eleven times. That's just one data piece, But I think
Speaker 10: we had a buying thrust with extreme negativity, and now
Speaker 10: we're in the second half of March was historically pretty
Speaker 10: strong seasonally, and now we've got the FED. Listen, you
Speaker 10: guys talked about it. I know we can talk about
Speaker 10: a little more. Were they really that dubbish? I don't
Speaker 10: think so. But I think it was a relief for
Speaker 10: the market, And clearly we saw what yields did and
Speaker 10: in the market in general. But hey, you know, we're
Speaker 10: not going to complain after the run we had.
Speaker 4: Wait, so net net you also said we would be
Speaker 4: upper around twenty percent this year in US stocks, So
Speaker 4: you do still believe that.
Speaker 10: Well, our well let's see here what we was back
Speaker 10: in December.
Speaker 4: That was back in December.
Speaker 10: Well understood. Yeah, we came out early this year with
Speaker 10: between twelve and fifteen percent in the United States. So
Speaker 10: we think and we think that's very likely still, Carol,
Speaker 10: Now what we're doing with the money we run, Well,
Speaker 10: we've we've we've been in gold. She whiz. I think
Speaker 10: April of twenty twenty three added some more gold. We
Speaker 10: were very very overweight US stocks for a while come
Speaker 10: up with you. But we've kind of done some tinkering,
Speaker 10: if you will, with the models we run for A
Speaker 10: Carson Partners. We've got some treasuries for the first time
Speaker 10: in a while. We do have about a twenty percent
Speaker 10: allocation to international stocks, but we're overweight equities and still
Speaker 10: like that's the way to go. But you know, we
Speaker 10: think the other parts can do well. But to answer
Speaker 10: your specific question, yeah, we think you know, stock market,
Speaker 10: I don't know what we're down now after today's rally
Speaker 10: three or four percent for the year, we think it
Speaker 10: can still hit double digits, which which sounds like a
Speaker 10: long way away, but it's very possible. Ryan.
Speaker 1: Are you trimming Are you trimming gold and adding to
Speaker 1: international equities? Are you adding to US equities right now?
Speaker 1: What exactly is your team doing?
Speaker 10: Yeah? Great, great question there. So as of now, no,
Speaker 10: I mean gold is it is. It's a monster, and
Speaker 10: it's incredible how well it's done. What we've done. We've
Speaker 10: actually gone to some low vall. Right, we sold some
Speaker 10: high ball stocks earlier this year, went into low vall
Speaker 10: because again, is this cycle ages maybe more volatility. To
Speaker 10: be honest, we weren't crazy about the megacap or MAG seven.
Speaker 10: So we're trying to say MAG seven. I know, Kim,
Speaker 10: I want most of the last year saying more neutral tech.
Speaker 10: Sometimes we get weird looks when we said that, But
Speaker 10: now we're seeing this rotation, and again the life blood
Speaker 10: of bull market is rotation, right, So tech isn't doing
Speaker 10: quite as well. That's okay. We're seeing leadership from other areas,
Speaker 10: but areas like low volatility industrials, financials, we think those
Speaker 10: are going to continue to do pretty well, and honestly they have.
Speaker 10: I know financials had that big pullback recently recently, but
Speaker 10: we still pretty optimistic that that's a group that's probably
Speaker 10: stilling to lead this. Financials.
Speaker 4: You know, we just talked about with our TV colleagues.
Speaker 4: We made fun of them, but you know, because we
Speaker 4: had a fun story to chat about, but they had
Speaker 4: a serious one about Oppenheimer cutting Goldman, Jeffreys and Carlisle
Speaker 4: on the M and A outlook, noting that the M
Speaker 4: and A rebound likely to lay or canceled. There were
Speaker 4: a lot of expectations coming into this Trump market environment
Speaker 4: and this administration President Trump, that it was just going
Speaker 4: to be go, go go in terms of the business environment,
Speaker 4: in the market environment, it's not exactly playing out like
Speaker 4: everybody expected. I don't think, you know, trump first term
Speaker 4: is exactly playing out like Trump's second term, at least
Speaker 4: so far. So you know, if tariff's day, if new
Speaker 4: policies come, if regulations maybe aren't so friendly, if M
Speaker 4: and A doesn't come back, I mean, is that a
Speaker 4: very different market environment than in your view. It may
Speaker 4: be your expectations for twelve or fifteen percent gains on
Speaker 4: the S and P are not then realistic.
Speaker 10: No, those are some great points. I will say. I
Speaker 10: heard you guys talking about Denny's and sausage and pancakes
Speaker 10: where I came on, I was kind of jealous. I
Speaker 10: didn't you have to talk about that. I love Denny's obviously,
Speaker 10: but you get in you get into it here. And
Speaker 10: I think what people thought when when President Trump won
Speaker 10: was You're going to get a couple things right, deregulation,
Speaker 10: better taxes, and tariffs in that order. We're not getting
Speaker 10: in that order, as we all know. You know, so
Speaker 10: I if the animal spirits is a popular word coming
Speaker 10: into this year, clearly those have been screeched to a halt.
Speaker 10: If you will, when you look at some of the
Speaker 10: sentiment polls, soft soft data centiment polls and things like that.
Speaker 10: But again, I guess you could say we're optimistic that that. Yes,
Speaker 10: we're all worked up over tariffs, and rightfully so. April second,
Speaker 10: as everybody knows, is that big day. But the market.
Speaker 10: I think the markets can go up on good news.
Speaker 10: Marts can go up on bad news. I mean five
Speaker 10: years ago now bad news.
Speaker 4: But there's good news, there's good news, there's good news,
Speaker 4: there's bad news, there's bad news. Do you feel comfortable
Speaker 4: in this market environment that we're not gonna have a
Speaker 4: lot of surprises and unexpected things coming our way?
Speaker 10: Well, put it this way, we do because we're still
Speaker 10: overweight equities and the unconstrained models we run, we're about
Speaker 10: seventy six percent equities, sixty percent is considered, you know,
Speaker 10: kind of right down the middle. So yes, we're overweight.
Speaker 10: And again a lot of it has to do with
Speaker 10: that over the top negative centiment. I'm sure other guests
Speaker 10: have talked about some of these things. We saw a
Speaker 10: huge Potz to call ratio spike last Thursday, But the
Speaker 10: one that AAII Cinnamon poll. I know this flaws in
Speaker 10: this one, but three weeks in a row, fifty five
Speaker 10: percent bears. All right, we haven't seen that since the
Speaker 10: March two thousand and nine low. It's just the random indicator.
Speaker 10: I have just hearing from people haven't heard from for years,
Speaker 10: but are very worried on what we're calling a kind
Speaker 10: of run of the mill normal ten percent correction. You
Speaker 10: tendesseee A lot of years that could be bullish with
Speaker 10: those lowered expectations, and today the Fed with it really
Speaker 10: that dubbish, Honest to goodness. I don't know if they
Speaker 10: really were, but they weren't hawkish and the market liked it.
Speaker 1: Ryan twenty seconds left. What makes you change your view
Speaker 1: that this will be an up year for the equity ends?
Speaker 10: Okay? Yeah, it turn us a little more cautious or negative.
Speaker 10: I think of more of a spike in credit spreads. Right,
Speaker 10: we are not seeing stress in the credit markets. Some yes,
Speaker 10: but Tim, we're just simply not seeing that. There's less
Speaker 10: stress now than it was in March. I'm sorry in
Speaker 10: August when we had that very scary un carry trade
Speaker 10: on wine. So that's the thing we watch. We're not
Speaker 10: seeing it yet.
Speaker 11: All right, can leave with Dietrich.
Speaker 3: Yeah, go ahead, Carol go.
Speaker 4: Behavior always fun, always fun. You keep us on our toes.
Speaker 4: Ryan Dietrich, chief market strategist at the Carson Group.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 4: I wanted to get to some of the big news
Speaker 4: of the day. President Trump started phone talks today with
Speaker 4: Ukrainian counterpart Voladimir Zelenski, a day after the US president's
Speaker 4: conversation with Vladimir Putin failed to win Russia's commitment to
Speaker 4: a thirty day ceasefire in Ukraine. Now earlier today on
Speaker 4: Bloomberg Surveillance on TV and radio, President Trump Special Envoy
Speaker 4: Steve Witkoff said that he believes President Putin is operating
Speaker 4: in good faith and that an end of the war
Speaker 4: could be soon.
Speaker 12: On Monday, we actually have the technical teams going in
Speaker 12: why because that's what we're down to. We don't need
Speaker 12: to have larging the larger overarching discussions that's been had
Speaker 12: and it was completed yesterday between the two leaders. They
Speaker 12: agreed on a pathway to to some ceasefire conditions today
Speaker 12: and to a full on cease fire that will be
Speaker 12: negotiated over the coming days. I actually think in a
Speaker 12: couple of weeks we're going to get.
Speaker 4: To it again. That's Steve Whitkoff, President Trump Special Envoy
Speaker 4: earlier on Bloomberg Surveillance. We also heard yesterday from the
Speaker 4: White House after that two and a half hour call
Speaker 4: between Presidents Trump and Putin, the White House read out
Speaker 4: that the two leaders agree that a future with an
Speaker 4: improved bilateral relationship between the United States and Russia has
Speaker 4: huge upside. This includes enormous economic deals and geopolitical stability
Speaker 4: when peace has been achieved. So the question is, can
Speaker 4: there be enormous economic deals business deals between the two nations?
Speaker 4: And if this feels a little bit like dejevou, you
Speaker 4: are right. A new book outlooks at just that and
Speaker 4: the recent experiment in capitalism from the nineteen nineties until
Speaker 4: twenty twenty two when global companies set up shop in Russia.
Speaker 4: Writing about that is Charles Hecker. He's a journalist and
Speaker 4: risk management consultant. His book just out this month is
Speaker 4: zero Sum, the arc of inter national business in Russia.
Speaker 4: He has spent forty years working in the Soviet Union
Speaker 4: and Russia, and he joins Tim and me on this Wednesday.
Speaker 4: So delighted to have you here with us. Charles. I
Speaker 4: do want to first ask you about what's been going
Speaker 4: on over the last couple of days and the conversations
Speaker 4: between the presidents of the United States, Ukraine and Russia.
Speaker 4: Does this look like to you like lasting diplomacy being
Speaker 4: worked out, peace negotiations being worked out. What's your read,
Speaker 4: especially with your knowledge of Russia and Putin?
Speaker 13: I think right now somewhere we're between two steps forward,
Speaker 13: one step back, or maybe even one step forward two
Speaker 13: steps back. I mean from today's conversation between President Trump
Speaker 13: and President Zelenski, we can at least draw the conclusion
Speaker 13: that the two presidents are once again sort of speaking regularly,
Speaker 13: speaking normally, and without the anger and the hostility that
Speaker 13: we saw of a couple of weeks ago that really
Speaker 13: set this process back dramatically.
Speaker 11: So we have a bit of a victory there.
Speaker 13: In that the two presidents are communicating as far as
Speaker 13: the Act Will Peace Agreement or the cease fire between
Speaker 13: Russia and Ukraine. Both sides are already accusing each other
Speaker 13: of violating that. This morning, so there were attacks allegedly
Speaker 13: from Russia on Ukrainian energy installations, and Russia says that
Speaker 13: Ukraine is doing the exact same thing back.
Speaker 4: So when Steve Woodkoff says he believes that, I think
Speaker 4: he said to some extent, well, some of these attacks
Speaker 4: were already happening, or I don't know. I guess the
Speaker 4: devil and timing is always in the detail, or the
Speaker 4: devil's in the details. He believes that President Putin is
Speaker 4: acting in good faith. Your knowledge of President Putin and
Speaker 4: how he does things, do you think he is well.
Speaker 13: One of President Trump's predecessors in the White House, when
Speaker 13: talking about Russia, always said trust, but verify, And you know,
Speaker 13: there hasn't been a whole lot of verification going on lately.
Speaker 13: And what we do know is that President Putin has
Speaker 13: in the past gone back on his word when it
Speaker 13: comes to holding off on attacking Ukraine. And so with
Speaker 13: what happened this morning, and with the fact that the timing,
Speaker 13: as you suggest, is still incredibly vague on when this
Speaker 13: is all going to start and when the ceasefire will
Speaker 13: kick off. We still don't know, first of all, what
Speaker 13: President Putin's word is and when or if he'll start
Speaker 13: to obey it.
Speaker 1: So I just want to get your thoughts about where
Speaker 1: we are in your view, if this actually is the
Speaker 1: beginning of the end of the war. You mentioned that
Speaker 1: both sides are already not agreeing to what had been
Speaker 1: agreed upon, but you also said that it's good news
Speaker 1: that the US is speaking to both of these parties.
Speaker 1: Do you actually think this is the beginning of the
Speaker 1: end of the war.
Speaker 11: It might be.
Speaker 13: I mean, I think if this is the beginning of
Speaker 13: the end of the war, it's going to take a
Speaker 13: lot longer than any of us anticipate, and a lot
Speaker 13: longer than any of the actors in these negotiations are
Speaker 13: telling us. I mean, we know, look that the strategic
Speaker 13: driver for Putin behind all of this is to keep fighting.
Speaker 13: So when he says that he's engaged in ceasefire negotiations,
Speaker 13: when he says this he's interested in a ceasefire, he's
Speaker 13: really not being entirely genuine with his counter parties, because
Speaker 13: really what Putin wants to do is to continue to
Speaker 13: press on. He thinks he's winning on the ground in Ukraine.
Speaker 13: His progress has been a little bit better than previously,
Speaker 13: and right now there's very little incentive for him to stop.
Speaker 1: So that's the perfect place to sort of transition to
Speaker 1: business in Russia over the last few decades, something that
Speaker 1: you've been writing about and that you know a lot about.
Speaker 1: If we were talking to you three years ago, we'd
Speaker 1: be talking to you about all the American businesses that
Speaker 1: have announced that they've stopped doing business in Russia as
Speaker 1: a result of Russia's invasion of Ukraine. I think a
Speaker 1: lot of people then would have thought this is going
Speaker 1: to have huge economic consequences and effects on the country
Speaker 1: and might cause Russia to think twice about what it's
Speaker 1: doing militarily.
Speaker 3: That obviously didn't happen, right.
Speaker 11: Well, exactly right.
Speaker 13: I mean, if we were talking about this precisely three
Speaker 13: years ago, what we would be talking about is absolute
Speaker 13: sort of streams of Western executives stampedeading towards Moscow's airports,
Speaker 13: among other places, trying to get out of the country.
Speaker 13: And this was exactly three years ago, a time when
Speaker 13: international offices, European and American offices were physically emptying out
Speaker 13: of expats and of Russian employees who were desperate to
Speaker 13: leave the country because the full scale engage invasion was
Speaker 13: kicking off. And so if we look at it now,
Speaker 13: you know, the US business community is looking at the
Speaker 13: negotiations between Trump and Putin and they sense that sanctions
Speaker 13: relief is in the air. And there are active conversations
Speaker 13: now in the companies that left Russia three years ago
Speaker 13: about going back. Not everyone will do it, but everyone
Speaker 13: is talking about it.
Speaker 4: Yet you know, you're right, or you note that in
Speaker 4: like one generation, we saw Russia open its doors and
Speaker 4: then close them again. So I mean what ultimately rules
Speaker 4: in Russia? Is it m is it business? Is it politics?
Speaker 13: Well, you're right, I mean the last generation in Russia
Speaker 13: was one of the biggest experiments in global capitalism ever.
Speaker 13: You had this emerging market opening up during a time
Speaker 13: when companies were globalizing rapidly, and everyone rushed into Russia
Speaker 13: following the collapse of the Soviet Union. You know, for
Speaker 13: companies to go back, it is partially all about money,
Speaker 13: but it's about that and a lot more.
Speaker 14: It's about a change.
Speaker 11: To the risk reward equation.
Speaker 13: And in the nineteen nineties, just about anything that you
Speaker 13: did in Russia, almost any kind of Western business activity
Speaker 13: made money. It was really like, you know, plant any
Speaker 13: seed and it would grow. That is no longer the case.
Speaker 13: Companies that want to go back to Russia or are
Speaker 13: thinking about going back, are not going back to the
Speaker 13: Russia of the nineteen nineties, not going back to the
Speaker 13: real go go days of the two thousands.
Speaker 11: It's very different now.
Speaker 4: Well, talk to us about this, and this is something
Speaker 4: Tim and I talked about with Angelus, who has understands Putin,
Speaker 4: understands Russia too, And I said, you know, what is
Speaker 4: today's Russia? What is Putin's Russia? Is it a great power?
Speaker 4: Is it a great economy? You know, what are their businesses,
Speaker 4: their alliances? Like what do we need to know? And
Speaker 4: some of it I asked facetiously when I said is
Speaker 4: it a great economy? But I mean, what is it today?
Speaker 13: Well, you know, there were a lot of people, not
Speaker 13: Angelis Stunt, who is one of my idols in the
Speaker 13: field of Soviet and Russian studies, from way back in
Speaker 13: the day. You know, there were people that said that
Speaker 13: Russia was a gas station with nukes, and you know,
Speaker 13: that is a vast underestimation of Russia's role in the
Speaker 13: global economy, and we understood that when Russian gas and
Speaker 13: oil and all of that came under sanctions, or oil
Speaker 13: came under sanctions, and when the Europeans tried to chase
Speaker 13: gas out of their pipelines, we understood what happened to prices.
Speaker 13: We also understood what happened on global grain markets after
Speaker 13: the start of the full scale invasion. So Russia is
Speaker 13: a lot more plugged into the global economy than we
Speaker 13: ever thought, and perhaps even more than we think, particularly
Speaker 13: an area of precious metals, rare earth metals, critical minerals.
Speaker 13: These are places where Russia has significant strategic deposits that
Speaker 13: are useful not just to Russia but to everybody else
Speaker 13: around the world. So you know, there is reason to
Speaker 13: go back in There are companies that are thinking about it.
Speaker 13: But but the war lasted a lot longer and is
Speaker 13: lasting a lot longer than anybody ever thought, and enormous
Speaker 13: changes have taken place on the ground politically and economically
Speaker 13: in Russia. And if you're thinking of going about going back,
Speaker 13: you have to be thinking, well, what kind of Russia
Speaker 13: is waiting for us?
Speaker 1: Well, what kind of what did Russian businesses Charles do
Speaker 1: to replace American businesses and Western businesses that left. We
Speaker 1: all saw stories of McDonald's, for example, pulling out. That
Speaker 1: was such a prominent example because of what happened in
Speaker 1: the when the fall of the Soviet Union happened, and
Speaker 1: that first McDonald's opened up in Russia. But we saw
Speaker 1: this sort of Russian version of McDonald's come in. What
Speaker 1: has been what has happened on the ground since American
Speaker 1: and Western businesses have left.
Speaker 13: Yeah, a lot of different things have happened since since
Speaker 13: Western and American companies left, and that is that you're
Speaker 13: absolutely right to point out that a number of significant
Speaker 13: Western brands, including McDonald's, which everybody loves to look at
Speaker 13: when we're talking about Russia, but other companies like Starbucks,
Speaker 13: for example, had a massive presence in Russia, and they're
Speaker 13: gone too. They've been taken over by local Russian owners.
Speaker 13: They were sold when those two companies decided that they
Speaker 13: wanted out. And so what those companies have been doing
Speaker 13: has been winning, growing and maintaining market share and trying
Speaker 13: to sort of run businesses. And right now it's very
Speaker 13: difficult to understand whether the current owners of McDonald's or
Speaker 13: Starbucks or any of the other companies that left. You
Speaker 13: know how keen they are to sell those back to
Speaker 13: the people that they bought them for just a couple
Speaker 13: of years ago. The other thing that's happened on the
Speaker 13: market is that companies from non sanctioning countries have moved in,
Speaker 13: and that includes countries like Turkey and China. They've taken
Speaker 13: over market share. They've moved in, and it's going to
Speaker 13: be difficult for returning companies to dislodge them.
Speaker 1: So it raises the question about initially why the companies
Speaker 1: left during the invasion. In your view, was it because
Speaker 1: it was seen as not ethical to do business and
Speaker 1: support a country that had this invasion, Was it because
Speaker 1: of American regulations or was it an actual business decision.
Speaker 13: There were a few different decisions. In some cases, sanctions
Speaker 13: made it illegal to do business in Russia, and there
Speaker 13: were companies that just had to get out because there
Speaker 13: was no way that they could transact in Russia at
Speaker 13: all without violating sanctions. Other companies looked at the reputational
Speaker 13: risk of doing business in Russia, and you had significant
Speaker 13: external pressure on these companies saying why are you still
Speaker 13: in Russia? You're paying taxes to the Russian government. The
Speaker 13: Russian government is using that money to buy weapons to
Speaker 13: kill Ukrainians, So what are you doing doing there? Companies
Speaker 13: felt that reputational pressure and they left. And then there
Speaker 13: were companies that for whom it was easier to leave
Speaker 13: because maybe Russia wasn't that big a market, maybe they
Speaker 13: weren't doing all that well there anyway, and why bother
Speaker 13: with all of the difficulty of doing business in this
Speaker 13: kind of environment, and so they also packed up and left.
Speaker 4: One of the things I want to ask you, and
Speaker 4: I thought about this, Charles. We are talking with Charles Hecker,
Speaker 4: journalist and risk management consultant. His book out this month,
Speaker 4: Zero Sum The Arc of International Business in Russia, spending
Speaker 4: some four decades in Russia and the former Soviet Union.
Speaker 4: You know, I think we think that introduce capitalism, introduced
Speaker 4: Western businesses, whether it's China, whether it's Russia, that these countries,
Speaker 4: these places will become liberal democracies. And here we are
Speaker 4: again seeing that it really doesn't work. So is it
Speaker 4: not going to work if we continue to get what's
Speaker 4: wrong with our thinking or why is it not working?
Speaker 13: One of the lessons that we have to have learned
Speaker 13: earned on exiting Russia, is that the assumption we made,
Speaker 13: just as you said, Carol, the assumption that we made
Speaker 13: on the way in, that engaging with Russia economically and
Speaker 13: commercially and sending Big Max to Russia would transform the
Speaker 13: country somehow into a mirror image of the West, or
Speaker 13: into at least a sort of liberal democracy that we
Speaker 13: could get along with.
Speaker 11: And you know, I think.
Speaker 13: We've learned over the years, whether we're talking about Russia
Speaker 13: or we're talking about China for example, or other countries,
Speaker 13: that you know, eating Big Max doesn't make you a democrat,
Speaker 13: you know, little d democrat. And so you know, if
Speaker 13: companies once again go back to Russia and think, look,
Speaker 13: you know, we're going to be on the ground and
Speaker 13: we're going to give this a chance, and we think
Speaker 13: that Russia may reform, that's a mistaken assumption. And you know,
Speaker 13: we realize that perhaps a little bit too slowly. I
Speaker 13: don't want to be too judgmental about our experience in
Speaker 13: Russia over the past generation.
Speaker 11: But it was a flawed assumption.
Speaker 4: So President Trump seems to want to create economic ties
Speaker 4: between the US and Russia. Some say, you know, the
Speaker 4: diplomacy or lack thereof or whatever you want to call
Speaker 4: it that we've had between the US and Russia and
Speaker 4: President Putin so far has not created a better relationship.
Speaker 4: So maybe this could Is that even possible with your
Speaker 4: knowledge of President Putin, how he runs the country, his
Speaker 4: type of leadership. I mean, is there some good that
Speaker 4: could come out of this?
Speaker 13: I think President Putin is going to remain resolutely hostile
Speaker 13: to the West going through the United States included, yes, absolutely,
Speaker 13: capitol W boldface letters. He is going to remain hostile
Speaker 13: to the West and the United States, and he will
Speaker 13: see them as enemy nations, and he will take a
Speaker 13: very skeptical view towards companies that come from those countries.
Speaker 13: And so he certainly doesn't believe that allowing Western companies
Speaker 13: into Russia or American companies into Russia is you know,
Speaker 13: an overwhelming good for the Russian economy or certainly for
Speaker 13: the Russian political system. And that's something that companies are
Speaker 13: going to have to manage and overcome and be extremely
Speaker 13: acutely aware of if or when they go back in tim.
Speaker 4: Ie, you get a quick one last question.
Speaker 1: Choy, Yeah, Charles, would you recommend that companies just don't
Speaker 1: go back to Russia.
Speaker 13: Companies are going to make up their minds about this
Speaker 13: based on how they view the risk reward decision. And look,
Speaker 13: there are companies out there in for example, the energy sector,
Speaker 13: in natural resources, in metals and minerals and mining that
Speaker 13: have really robust appetites for risk and cast iron stomachs
Speaker 13: for managing it. They will probably go back, and they're
Speaker 13: going to do it carefully. They've done this before. They're
Speaker 13: doing business in places like Iraq right now. So they'll
Speaker 13: go back to Russia and we'll see how they survive.
Speaker 4: Listen, so love this. Hope you can get you back
Speaker 4: real soon, because we know that this is going to
Speaker 4: be certainly an ongoing and kind of story that will
Speaker 4: probably go on for a while. Charles, thank you so much.
Speaker 4: Collect with the book.
Speaker 11: It's a pleasure. Thank you.
Speaker 4: Pleasure is ours as well. Charles Hecker, journalist, risk management consultant.
Speaker 4: Book just out. It is called Zero Sum The Arch
Speaker 4: of International Business in Russia.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
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Speaker 2: or watch US live on YouTube.
Speaker 11: Yes, Splashdown Crew nine back on Earth.
Speaker 4: Yes, indeed everybody, Yes, those two NASA astronauts whose planned
Speaker 4: short trip to space became one that left them in
Speaker 4: orbit for nine months. Yes, you know they are back
Speaker 4: on planet Earth. But Wilmore and Sonny Williams coming home
Speaker 4: to a United States though, that is a bit differently
Speaker 4: are different, I should say, it's got a new president,
Speaker 4: a new Republican controlled Congress, and a world that some
Speaker 4: would say is being turned upside down by new US policies. Now,
Speaker 4: those two NASA astronauts also returned to Earth in a
Speaker 4: SpaceX craft, which is, of course, you know, space X
Speaker 4: a part of the Elon Musk Empire. So too is Doze,
Speaker 4: the entity that is tasked with an ever widening mission
Speaker 4: to seemingly remake the US government, and that includes cuts
Speaker 4: and spending and in the federal workforce. So we thought
Speaker 4: it was time to do kind of a check on
Speaker 4: all things Elon and Tesla and SpaceX and Doze and more.
Speaker 4: To do that, we have back with us Bloomberg business
Speaker 4: Week columnist Max Chafkin. He is co host of the
Speaker 4: elon Ing podcast, author of the Contrarian Peter Teel and
Speaker 4: Silicon Valley's pursuit of power. Max is here in our
Speaker 4: Bloomberg Interactive Broker studio. Of course Tim out there in
Speaker 4: our San Francisco bureau. Max, good to have you here.
Speaker 4: We were talking going on, well, you know, we find
Speaker 4: we were thinking about Elon today and like he's in
Speaker 4: this kind of funny spot. He finally brings these two
Speaker 4: astronauts that I know NASA doesn't want us to use
Speaker 4: the word stranded, but we're stranded up in space. They
Speaker 4: were safe, but SpaceX brings him home. At the same time,
Speaker 4: you've got a judge, a federal judge ruling that most
Speaker 4: likely exercised unconstitutional power in the Trump and miss efforts
Speaker 4: to shutter the US agency that manages for an AID.
Speaker 4: I mean, there's so much going on, the highs and
Speaker 4: lows that seemed to be Elon. How do you because
Speaker 4: you continually have to kind of put it all together,
Speaker 4: makes sense? How do you put it all together?
Speaker 6: Well, I think, of course, this SpaceX mission is a
Speaker 6: demonstration of all that that company has achieved.
Speaker 14: They are the main way.
Speaker 6: That America gets its astronauts to and from and cargo
Speaker 6: to and from the International Space Station. There was this
Speaker 6: there is this competing effort that the Boeing craft that
Speaker 6: is going slower and Elon Musk, as you said, stepping
Speaker 6: in Now. I think the problem here is Musk, I
Speaker 6: think in his mind and when you look at like
Speaker 6: some of the things he said about what he wants
Speaker 6: out of the Trump administration, he just sort of expects
Speaker 6: Trump to essentially give a bunch more contracts to SpaceX.
Speaker 6: I think in these court rulings and in some of
Speaker 6: the pushback, we're seeing political pushback as well as pushback
Speaker 6: from consumers, like some of this these vandal you know,
Speaker 6: vandalistic acts on Tesla stores and so on. We're seeing
Speaker 6: that that may prove to be more difficult than I
Speaker 6: think maybe the Elon Musk uh, you know, super fans
Speaker 6: would have believed.
Speaker 3: What do you mean by that, Max, How is that
Speaker 3: more difficult?
Speaker 10: Well?
Speaker 6: I think there's political well sort of, We're a couple
Speaker 6: of things. One is we're starting to see sustained political
Speaker 6: opposition not just to Donald Trump, right, whose poll numbers
Speaker 6: have have dipped a little bit in most polls since
Speaker 6: he took office, but also but even more so to
Speaker 6: Elon Musk. Elon Musk's has gone from being a very popular,
Speaker 6: uh public figure to being an unpopular public figure, even
Speaker 6: even more unpopular than Donald Trump were like a typical
Speaker 6: Republican politician.
Speaker 14: And so so that is going to be a challenge.
Speaker 6: That's a challenge because you know, Democrats and Republicans are consumers,
Speaker 6: and if people are generally mad at Elon Musk, they
Speaker 6: may not buy Tesla's We're seeing that show up in
Speaker 6: some of the Tesla's sales data. I think it's also
Speaker 6: a challenge if we're talking about some sort of effort
Speaker 6: to hand SpaceX another contract.
Speaker 14: Now, of course NASA did use SpaceX.
Speaker 6: To bring these astronauts back, but as he said Carol,
Speaker 6: they didn't really have an option. And and what Elon
Speaker 6: Musk is going to be talking about and is talking
Speaker 6: about to some extent, are are contracts where there are
Speaker 6: other options.
Speaker 14: So this rural broadband program, where Musk.
Speaker 6: And his supporters would very much like the emphasis to
Speaker 6: go away from fiber optic to satellite, that is going
Speaker 6: to have political opposition. We're seeing opposition in Italy where
Speaker 6: Georgia Maloney, who's of course a Musk ally, there's been
Speaker 6: talk of giving SpaceX Starlink the satellite division of SpaceX,
Speaker 6: a big contract. We're seeing opposition there, and then I
Speaker 6: think you're even starting to see little hints of opposition
Speaker 6: to know what you might see as a more transactional
Speaker 6: thing in the US, where if Elon Musk were to
Speaker 6: get what he wants, he would get like a giant
Speaker 6: Mars contract. Now, I think that is going to be
Speaker 6: as I said, it's going to be difficult. They're going
Speaker 6: to be senators, congressmen who are who are in the
Speaker 6: States where these other legacy aerospace contractors are who are
Speaker 6: not going to be happy about that.
Speaker 1: There's also business challenges too, Max, and I'm curious about
Speaker 1: your thoughts on this. We got news this week that
Speaker 1: Shaomi is actually raising its target for a number of
Speaker 1: vehicles that it plans to deliver this year. Byd comes
Speaker 1: out with this five minute charging essentially equivalent of going
Speaker 1: into a gas station filling up your gas tank. Tesla
Speaker 1: doesn't have that technology. In the US, you can't get
Speaker 1: these Chinese autos, but around the world you certainly can.
Speaker 1: It seems like there are some real business realities that
Speaker 1: the Tesla empire is running into.
Speaker 6: Yes, I mean we would be talking about these challenges
Speaker 6: even if the politics were working perfectly for Elon Musk,
Speaker 6: you talked about China. We've seen Chinese automakers make huge strides,
Speaker 6: and you're right, Tesla is protected to some extent because
Speaker 6: these Chinese companies are not in the US. But Tesla
Speaker 6: gets about forty percent of its sales from China, so
Speaker 6: this is like a wrecked threat to its business. Also,
Speaker 6: these companies are operating in other regions where Tesla you know,
Speaker 6: collects a percentage of its sales, so even today this
Speaker 6: is a problem. And then the other thing you're seeing
Speaker 6: is a lot of these Chinese automakers are offering basically
Speaker 6: their own versions of what Tesla calls full self driving.
Speaker 6: This is an advanced driver assistance software suite, and they're
Speaker 6: effectively giving this software away.
Speaker 14: The Tesla bulls had.
Speaker 6: Been expecting that they would be able to charge huge
Speaker 6: sums of money for Tesla Full self driving right now
Speaker 6: cost about one hundred bucks a month now, and when
Speaker 6: Musk has talked about he said, it's going to get
Speaker 6: even more expensive because if you could, you know, take
Speaker 6: a nap in your car, that would be worth even
Speaker 6: more what were now. I think there are reasons to
Speaker 6: be skeptical. I wouldn't, you know, if you're driving down
Speaker 6: the highway right now, I wouldn't take any sleeping pills
Speaker 6: and trust the Tesla. But that said, even if that
Speaker 6: technology were to pan out, even if it were to
Speaker 6: do exactly what Elon Musk says it's going to do,
Speaker 6: there are potentially other companies doing the same thing for
Speaker 6: less money, and that's a challenge.
Speaker 4: I feel like the million billion, trillion dollar question though, Max,
Speaker 4: is is there information that Elon Musk is getting working
Speaker 4: within the government that is going to give him this
Speaker 4: incredible advantage or access to data? I think about you know,
Speaker 4: the AI you know startup that he's involved in, and
Speaker 4: like all this stuff, is there stuff or do we
Speaker 4: not even know that he is getting access that even
Speaker 4: if he leaves tomorrow, that he has an advantage in
Speaker 4: some way.
Speaker 14: I mean he has.
Speaker 6: I think that in theory, yes, you know, AI systems
Speaker 6: rely on huge sums of data.
Speaker 14: If Elon Musk were able to like funnel a.
Speaker 6: Bunch of if data were to leak from the federal
Speaker 6: government into GROCK, you know Elon Musk's large language.
Speaker 14: Model, that could in theory help GROCK.
Speaker 6: But I think there are are a number of reasons,
Speaker 6: not that I don't know that that's the most likely
Speaker 6: scenario or the most concerning scenario.
Speaker 14: There would be.
Speaker 6: Ethical issues, legal issues, issues of personal privacy, and also
Speaker 6: I just think that the political advantages he has by
Speaker 6: being close to Trump probably vastly outweigh whatever. You know,
Speaker 6: you know, incremental data. There are a lot of data sets,
Speaker 6: a lot of financial data sets out there. I do
Speaker 6: think some of these agencies that are being you know,
Speaker 6: as you know the Trump administration and supporter see it reformed,
Speaker 6: as its critics would say, gutted, were agencies that were
Speaker 6: investigating Elon Musk. We're holding Elon Musk companies backs, you know,
Speaker 6: x Elon Musk's you know, the new name for Twitter
Speaker 6: has been trying to launch these payment services, effectively mobile
Speaker 6: banking through you know, the company that you use to
Speaker 6: send memes and uh and and the CFPB has been
Speaker 6: one of the barriers there, like CFPB, you know, is
Speaker 6: it has been you know, it's it's in the courts now,
Speaker 6: but but the Trump administration is essentially attempting to shut
Speaker 6: it down. NITSA, the highway regulators, they have been investigating Tesla.
Speaker 14: There are ways in which Musk.
Speaker 6: Could sort of clear or a path in terms of
Speaker 6: from a regulatory perspective. But again, all these things are
Speaker 6: going to create political consequences downstream, political consequences, and that
Speaker 6: those it's gonna be primarily Democrats, that's who we're seeing
Speaker 6: protesting in front of Tesla stores, but I would not
Speaker 6: be surprised if you also see some Republicans with concerns
Speaker 6: about this stuff as well.
Speaker 8: Well.
Speaker 1: It seems like now, Max, the courts are really, as
Speaker 1: Carol mentioned in our intro, the.
Speaker 3: Courts have.
Speaker 1: Not reined in, but they've certainly said that some of
Speaker 1: what Elon Musk has done is not allowed, especially with
Speaker 1: regard to us aid. You know, the questions whether or
Speaker 1: not these employees can actually go back to work and
Speaker 1: if they're going to be reinstated full time. We don't
Speaker 1: know the answer to that yet. But are the courts
Speaker 1: that raining him in.
Speaker 6: Yes, the courts are reigning in Doje and or at
Speaker 6: least maybe creating a situation where what Musk is doing
Speaker 6: is not to have a huge long term effect, or
Speaker 6: even that it may end up costing more money, because
Speaker 6: of course, if you have to, if you lay a
Speaker 6: bunch of people off you spend a bunch of people,
Speaker 6: spend a bunch of money laying people off, and then
Speaker 6: you have to spend a bunch of money bringing them
Speaker 6: back online. That ends up costing more money. So there
Speaker 6: is a situation, there is a way in which some
Speaker 6: of some of this stuff that's working its way through
Speaker 6: the courts ends up sort.
Speaker 14: Of blunting the impact of DOGE.
Speaker 6: I mean, it's important remember Musk is not the only
Speaker 6: actor within the Trump administration who's or within the Republican
Speaker 6: Party who is trying to rein in parts of the
Speaker 6: federal government. And so so Trump is trying to do
Speaker 6: this as well. Congress will certainly, I think, at least
Speaker 6: attempt to put some of this into law. So there
Speaker 6: will be you know that Musk will have some support.
Speaker 6: It's not just going to be Musk versus the courts.
Speaker 4: Should we assume that as long as Elon's deep pockets
Speaker 4: are around to support the Republicans and Trump's doings, that
Speaker 4: he's going to stick around. I think there's a lot
Speaker 4: of just ussion about, you know, when does the president
Speaker 4: get tired of Elon?
Speaker 8: Right?
Speaker 6: Yes, that's the conventional wisdom is at some point Trump
Speaker 6: will get tired of seeing Elon Musk's you know face,
Speaker 6: you know, on TV or newspapers, hearing people talk about
Speaker 6: it when when they should be talking about all the
Speaker 6: great things he's done, get frustrated and he'll get sort
Speaker 6: of iced out.
Speaker 14: I think that is not very likely, and.
Speaker 6: It's for the exact reason you just said, Carol. Musk
Speaker 6: is a major donor to the Republican campaign, to Republican campaigns.
Speaker 6: He will be a major force by his own account
Speaker 6: anyway in the midterm elections. And really he is is
Speaker 6: a very important ally for President Trump because if Trump
Speaker 6: is trying to do something and there's opposition from Congress,
Speaker 6: he has this very very very very wealthy friend, Elon Musk,
Speaker 6: who can fund a primary challenge. The other thing is,
Speaker 6: we saw this infomercial, you know at the White House
Speaker 6: where Trump you know, talked about all the wonderful things
Speaker 6: about Tesla and in fact bought a Tesla you know,
Speaker 6: on the south lawn of the White House. You know,
Speaker 6: really helpful problem or potentially very helpful to Tesla. You know,
Speaker 6: that seem to be the goal. Around the same time,
Speaker 6: New York Times reported that Musk had promised to put
Speaker 6: one hundred million dollars into Trump's own packs. So Musk
Speaker 6: is still donating money on top of the roughly three
Speaker 6: hundred million he put into the twenty twenty four cycle.
Speaker 6: He said he's going to put more into his own packs.
Speaker 6: He in fact is funding this Wisconsin State Supreme Court race.
Speaker 6: There are going to be more races, and he's giving
Speaker 6: Trump money. I mean, he is a very very important la.
Speaker 6: I think the real question is does Musk get tired
Speaker 6: of this? Does Musk start to wonder do I really
Speaker 6: want to have a day to day role?
Speaker 14: And how much is that day to day role hurting
Speaker 14: my companies?
Speaker 6: Because you look at a stock price, investors are not
Speaker 6: super happy.
Speaker 4: All right, Always a lot going on and so appreciate
Speaker 4: it keeps us busy. I'm always confused. How many more
Speaker 4: headlines is it Trump versus like we get in any
Speaker 4: given day. Max Chak and thank you so much. Calmness
Speaker 4: with Bloomberg Business Be co host of the Elon Inc. Podcast,
Speaker 4: which you can find where every you get your podcast,
Speaker 4: also on the Bloomberg and at Bloomberg dot com.
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